Risk assessment is the process used by insurers to identify and analyze the potential risks, gathering and analyzing data in order to better estimate the insurance premium to optimize the company income.
Risk assessment is a continuous process, which continuously monitors and updates the evaluation based on new information.
Data science and machine learning can help with the problem by providing methods to estimate the likelihood and financial impact of uncertain events (e.g., claims, natural disasters, fraud).
- Predictive models (e.g., logistic regression, decision trees) to assess claim probability.
- Catastrophe modeling for rare but severe events.
- Survival analysis for life/health insurance risks.
- Incorporating external data: weather, economic indicators, credit scores.
What Is Risk Assessment In Insurance? - The Friendly Statistician - YouTube